Numerous studies have shown that women have a harder time than men engaging in entrepreneurship or business investing. Women also launch firms with significantly less capital than men, which limits their ability to grow their firms and increases their risk of financial distress in periods of adversity.
Now, new research from the Hebrew University of Jerusalem shows that crowdfunding could level the playing field for women wishing to raise capital for their ventures, and in some cases even give them an advantage.
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Crowdfunding is a recent form of fundraising that involves financing projects or ventures by raising small amounts of money from many people, usually via the Internet. To investigate whether crowdfunding could reduce the barriers of female entrepreneurs to raise capital, the researchers analyzed data from Kickstarter, one of the world’s leading crowdfunding platforms, that included 13,533 entrepreneurs classified by gender, 898,491 investors classified by gender, and investments totaling over 120 million dollars, from April 2009 through March 2012.
The researchers, led by Dr. Dan Marom and Prof. Orly Sade found that women made up about 35 percent of the project leaders and 44 percent of the investors on the Kickstarter platform.
They documented that while on average, men on Kickstarter seek significantly higher levels of capital for their projects and raise more funds than women, women enjoy higher rates of success in funding their projects. Women enjoyed a 69.5 percent success in getting funded versus 61.4 percent for men, with further analysis showing that it was not the women’s more modest financial goals that accounted for their higher rate of success.
Is same-gender investing really a thing?
The researchers found a positive correlation between the gender of the project leader and the percentage of the same gender investors. Kickstarter projects led by a female entrepreneur were on average mainly financed by female investors. And even though women comprised 35 percent of the project leads on Kickstarter, male investors only invested in about 23 percent of projects that had female project leads.
The researchers wanted to check if this tendency for same-gender investing is due to the female entrepreneurs’ tendency to focus and dominate areas such as food, fashion and dance, or if it is related to gender equality perceptions of male investors. By conducting a survey among a sample of Kickstarter investors, the researchers found that those male investors deemed to have a greater openness to gender equality were more likely to invest in female-led projects.
The researchers guessed that if women are able to access financial capital through crowdfunding platforms where women are more likely to be investors, there could be a jump in female entrepreneurship in male-dominated fields such as comics and games, which may offer more growth opportunities than more traditional fields.
According to the Hebrew University’s Prof. Orly Sade, “These findings indicate that the increasing prevalence of crowdfunding platforms may lead to increased participation of women as investors, and to an increase in the flow of capital to projects led by women. In order to further this trend it is important to encourage women to pursue opportunities in less traditional, male-dominated fields such as games, which may offer more growth opportunities than more traditional fields; and at the same time to work to change perceptions in the general population regarding gender equality, as those perceptions play a role in investment decisions.”
The research was conducted by Dr. Dan Marom and Prof. Orly Sade from the Jerusalem School of Business Administration at the Hebrew University of Jerusalem, and Dr. Alicia Robb, a senior fellow at the Kansas City-based Kauffman Foundation and at UC Berkeley.
Photos: Rocio Lara/ screenshot